32 Responses to “Sole Proprietor – Example of Income Statement and Balance Sheet”

sabrendasaid

i need help because on my balance sheet it has an area for inv.beginning and inv. ending and for the beginning my inventory was 25000.00 but at the end of the yr my inv is 3400.00 and it is adding both so my assets were more. is this correct or is it suppose to subtract the ending from the beginning? i need help!

coreinasaid

During the year you are to debit all inventory purchased to cost of good sold in the income statement. At the end of the year you would do an inventory count and the remaining balance is then going to be Debot Inventory ending in the balance sheet and credit cost of good sold which is in the income statement. If this is a new company you will notice that this has no opening inventory.

But in the next year you would debit opening inventory and then credit closing inventory (to switch close inventory to open). And do again as you did above for closing inventory.

In the third year you would put all of open inventory (from the first year) amount into cost of good sold by debit Cost of good sold and credit inventory for what ever balance was in the opening inventory. Then follow step second year steps to put closing inventory in to opening inventory.

Christian Jaysaid

I’m a BS Accountancy student here in the Philippines and luckily, I stumble upon your blog… I have problems with preparing a balance sheet… Could you help me with it? If yes, kindly contact me at christianj_415@yahoo.com

Hi,
I saw the blog on learnaccounting.wordpress.com
Very absorbing
In fact I have been Googling for this for ages
learnaccounting.wordpress.com is a site i’ll keep bookmarked
Great effort keep up the good work !
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Reed Smithsaid

learnaccountingsaid

They represent profits accumulated up to the beginning of the year and the end of the year. Sometimes also referred to as Accumulated Profits Brought Forward (B/F) ie. at the beginning and Accumulated Profits Carried Forward (C/F) ie. at the end of the year. Also frequently referred to as Retained Earnings.

That’s a great example of the income statement that I was looking for thanks. I managed to find a sample income statement that shows how the public company and the small business would show the same items of the income statement alongside each other.
Cheers.

michellesaid

hey there.. i’m mich & i’m currently taking up bs in business administration here in Philippines.. I’m just kinda have a problem when i am working on my balance sheet and income statement because it’s not balanced. I already looked for the possible errors but the problem is still the same.. Could you help me?

learnaccountingsaid

Jolidasaid

I would like to know as a sole proprietor do i need to show financial statements? I am in the process of selling my business and people are requesteing it, however as far as i know i do not have to have finanacial statements only my own track record of income ec. Please do advise. Thank you

learnaccountingsaid

That depends on the law in your country. In Malaysia, there is no need for the accounts of a sole proprietor to be audited. However, for annual income tax filing purpose, a set of accounts to arrive at the profit for the year and to facilitate tax computation, a set of accounts (balance sheet and income statement are prepared). As to full set of financial statements (balance sheet, income statement, statement of changes in equity, cash flow statement and the explanatory notes), they are usually prepared if the sole proprietor would like its financial statements to be audited voluntarily by auditors.

alaysaid

learnaccountingsaid

staff salaries are recorded as usual. For owners’ salaries, it is commonly not recorded as an expense of the sole proprietor’s accounts, this is because the entire profit of the business would be reported as income for the sole proprietor in his/her income tax return (this is the scenario in my country). As and when the sole proprietor needs money, he would withdraw them from the business and recorded as drawings in the accounts.

Sandysaid

It would be a great help if you can enlighten me on this matter. I will be winding up a sole proprietor company which is less then a year. Do I need to prepare the accounts for auditing for annual tax return. I don’t have any knowledge on full sets of accounts how do I go about it.

learnaccountingsaid

A lot of important information is required before I could advise you what to do. If this sole proprietor business has commenced operation in it’s first year and earned taxable income, tax law requirements in your country need to be complied with. I suggest you to consult your accountant or speak to an accounting firm for advice to gauge whether you could handle this yourself. From my experience, many accounting firms don’t charge you on inquiry of their services. To be sure check on this before you proceed.

learnaccountingsaid

An enterprise company is not subject to the requirement of audit. However, the accounts still need to be done up for tax submission purposes and the relevant tax computation be done to calculate the income from business source and reported in the Form B accordingly. If you are not familiar as to how to do this, that’s where the service of an accountant is most desired.

hi .. i am a beginner in this field of accounting .. i was having my trainee right now .. and it seems that no one will teach me about book keeping and doing financial statement .. as a beginner , which one will i start to do my book keeping and financial statement .. what do i need to have this ? .. thanks for the information you will give ..